Venezuela offers oil stake to ONGC Videsh

Cash-hungry Venezuela has offered ONGC Videsh (OVL) an increased stake in an oil field, according to two sources close to the proposal, as the country seeks to shore up its bruised energy industry and strengthen ties with New Delhi.

State oil firm Petroleos de Venezuela (PDVSA) has proposed selling a 9% stake in the San Cristobal field to OVL, a subsidiary of Oil and Natural Gas Corporation, the sources said this week.

OVL already holds a 40% stake in the field, which produces around 22,000-23,000 barrels per day (bpd) of oil. While the amount of the sale would be relatively modest, according to analysts, any extra income would be welcome for PDVSA.

Venezuela, struggling under triple-digit inflation and Soviet-style product shortages as its socialist economy unravels, has been hit hard by the falling price of oil, its economic lifeline.

The OPEC nation’s oil output has slipped, and PDVSA is struggling to maintain investment in its oilfields, which hold the world’s largest crude reserves. The sources said that PDVSA was still negotiating with ONGC and no deal was certain.

Under Venezuela’s hydrocarbon law, the state must maintain more than 50% of all oil ventures, hence PDVSA can only offer up to 9% to the Indian firm.

“ONGC is still evaluating the options,” one of the sources said, adding that the purchase could be challenging given OVL’s revenues are suffering due to lower oil prices.

ONGC Videsh Managing Director N K Verma declined to comment. PDVSA did not immediately respond to a request for comment.

Another potential complication is Venezuela’s murky legal framework during a power struggle between the opposition and the unpopular leftist government of President Nicolas Maduro.

The potential deal could also help once closer relations between Caracas and New Delhi that have taken a hit as Venezuela’s economy unravelled.